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Ministry of Agro and Rural Industries and Ministry of Small Scale Industries have been
merged into a single Ministry, namely, MINISTRY OF MICRO, SMALL AND MEDIUM
ENTERPRISES
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Definition of Micro, Small and Medium Enterprises is given by MSME Act, 2006
REGISTRATION OF MSME
Registration of MSME:
1. Voluntary and not Compulsory with respect to Micro and Small Enterprises
3. Two types:
Provisional Registration
Permanent/Final Registration
REGISTRATION PROCEDURE
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CONTINOUS DISCLOSURE
a. Change in the investment in plant and machinery or in equipment, the enterprises who
have already filed Entrepreneurs Memorandum should inform the District Industries Centre
of the same in writing within three month of the change in investment.
NOTE: EM PART II to be filed within 2 years or else the EM PART I filed by a person will
become invalid
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Online Entrepreneur Memorandum Acknowledgement is valid only when it is self certified by the
applicant and the same has been submitted with four copies within 30 days from the date of
filing of online application to the DIC/Regional Joint Director of Industries and Commerce.
DE-REGISTRATION OF MSME
Investment limits more than the limit specified under this Act from time to time.
When an registered enterprises starts manufacturing any new item or items that require an
industrial license or other kind of statutory license.
a. If a micro or small enterprise has filed a memorandum with DIC of its area, then it stands
to gain as to timely payment in respect of supply of goods or rendering of services to any
buyer.
b. With the enactment of MSMED Act, 2006, the Interest on delayed payments to small
scale and ancillary industrial undertakings act, 1993 is repealed w.e.f. 2nd October, 2006.
c. Any Buyer who purchased any goods or availed any services from Micro or Small
enterprises which has filed a memorandum with the authority, then the buyer shall make the
payment on or before the date agreed upon between him and the supplier in writing or within
a period of 15 days from the day the goods are delivered or services are rendered. However
the period of credit can not exceed more than 45 days from the date of delivering product or
services.
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Excise Scheme
3. Statutory support such as condition and the Interest on Delayed Payments Act.
Since filing is optional, no penalty is attracted. However, filing the memorandum is pre-
requisite to qualify as a supplier for Chapter V purposes and non-filing will make the
supplier ineligible to benefits under Chapter V relating to right to receive timely payment and
right to receive interest under Sec 16 for delayed payment.
REGISTERED MSME
1. The Buyers have to confirm the registration of the suppliers under the MSMED Act, 2006
45 days from the date of Delivery/ deemed date of Delivery, whichever is earlier
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Note: 15 days from the date of acceptance or the day of deemed acceptance of any goods
or services from a supplier would be treated as the credit period if nothing is agreed between
the Buyer and Supplier.
Application to Micro and Small Enterprises Facilitation Council (MSEFC) can be made in
case of dispute for starting the arbitration process. Once the application is done under
MSEFC, there is no provision to withdraw the proceedings.
CLASSIFICATION OF MSME
Classification of the Micro and Small Enterprises (manufacturing and service) shall be under
Priority Sector which includes Small Road and Water Transport Operator, Small Business,
Professional and Selfemployed Persons and all other service enterprises. Retail Trade will
not be classified under Micro and Small enterprises (service sector).
FINANCE
DIRECT FINANCE:
1. All loans granted to Small Enterprises including Micro Enterprises (both Manufacturing
and Services) will be classified under Direct Finance to Micro and Small Enterprises Sector.
2. All advances granted to units in the KVI sector, irrespective of Sector their size of
operation, location and amount of original investment in Plant and Machinery, will be eligible
for consideration under the Sub Target (60 percent) of the Small Enterprises segment within
the Priority Sector.
INDIRECT FINANCE:
1. Credit to persons involved in assisting the decentralized sector in the supply of inputs to
and marketing of outputs of artisans, village and cottage industries.
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Advances to cooperatives of producers in the decentralized sector viz., artisans, village and
cottage industries.
2. Loans granted by banks to NBFCs for on lending to Small and Micro enterprises
3. Existing investments as on 31st March, 2007, made by banks in special bonds issued by
NABARD with the objective of financing exclusively non-farm sector may be classified as
Indirect fianc to Small Enterprise sector till the date of maturity of such bonds of March 31,
2010, whichever is earlier. Investment in such special bonds made subsequent to March 31,
2007 will, however, not be eligible for such classification.
CREDIT FACILITIES
- Term Loan
- Cash Credit
- Letter of Credit
COMPOSITE LOAN
COMMON MSME:
b. Small business
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c. Retail trade
d. Professional
POLICY OF MSME:
a. Legislation
b. Credit support
c. Fiscal support
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FEDERAL GOVERNMENT: - responsible for policy, credit flow, centrally sponsored schemes
OPPORTUNITIES TO PROFESSIONALS
MSME
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a. 90% of MSME in India are unregistered (out of which nearly 80% are Sole Proprietor
Firms)
f. Provides a good market for an foreign companies to start venture capital business in India
Therefore professional fraternity shall take lead to advice those entrepreneurs who are still
running their business in sole proprietorship mode or partnership format to get themselves
converted into either a Company or Limiter Liability Partnership in order to reduce their risk
exposure in their business and get into business expansion without worrying the concept of
unlimited liability.
MSMED Act specifies that it is the duty of buyers to make disclosures in the annual accounts
but this does not mean that the Auditor has no duty to verify these disclosures. The auditor
is required to ensure the compliance of various provisions:
This is evident from Auditing and Assurance Standard (AAS) 21, Consideration of Laws and
Regulations in an Audit of Financial Statements. The salient features of this AAS are given
below:
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The auditor should recognise that the noncompliance by the entity with the laws and
regulations may materiality affect the financial statements.
Note: noncompliance as used in this AAS refers to acts of omission or commission by the
entity being audited, either intentional or unintentional, which are contrary to the prevailing
laws or regulations.
Privileges enjoyed by Micro Small Medium Enterprises Such units can manufacture any item
including those notified as exclusively reserved for manufacture in the small scale sector.
Medium units can manufacture reserved items if they have obtained a carry on business
licence or accept an export obligation of 50% of their production
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Clause 5.2 of the above cited policy states that FDI up to the limit indicated against each
sector/activity is allowed/ permitted subject to other conditions indicated & security conditions
where applicable. In sectors/activities not listed in this Clause, FDI is permitted upto 100% on
the automatic route, subject to applicable laws/sectoral rules/regulations/security conditions.
A Small Scale industrial undertaking (SSI) was defined in terms of: (i) investment in fixed
assets in plant and machinery and (ii) equity participation (both domestic and foreign) in the
SSI, by other industrial undertakings prior to 2006. Vide Press Note 18 (1997), it was further
notified that, for cases of foreign collaborations, since the maximum equity participation
allowed for in small scale units was 24%, proposals for induction of foreign equity more than
24% would be subject to the condition that: (i) the company would get itself de-registered as
a small scale unit and (ii) obtain industrial licence or file Industrial Entrepreneur
Memorandum with SIA, as per prescribed policy and procedure.
With the promulgation of the Micro, Small and Medium Enterprises Development (MSMED)
Act, 2006, the ceiling for equity participation (both domestic and foreign) in the micro and
small enterprises, by other enterprises, was removed and Micro and Small Enterprises
(MSE) (earlier small scale industries) were defined solely on the basis of investment in plant
& machinery (for micro and small enterprise engaged in manufacturing) and equipment (for
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micro and small enterprise engaged in providing or rendering of services). Accordingly, this
change was notified by Notification No. S.O. 563(E) dated 27th February 2009 of
Department of Industrial Policy & Promotion, Ministry of Commerce & Industry.
Thus the present policy on FDI in MSE permits FDI subject only to the sectoral equity caps,
entry routes and other relevant sectoral regulations. Press Note 18 (1997 series) stands
modified to the extent above. Therefore it is now clear Foreign Direct Investment in Micro Small
Enterprise is subject only to the sectoral equity caps, entry routes and other relevant sectoral
regulations. In sectors/activities not listed in above cited consolidated FDI Policy 2011, FDI is
permitted up to 100% on the automatic route, subject to applicable laws/sectoral
rules/regulations/security conditions. Hence, if the company is a micro or small enterprise, 100%
FDI seems to have been permitted under automatic route subject to the sectoral caps.
CONCLUSION
Registration of an entity under the Act is a medium to enjoy the benefits available to SMEs in
terms of easy finance availability from Banks, preference in procuring Government tenders,
stamp duty,concession in electricity bills and timely receipt of payments from the buyers or
debtors, reimbursement of ISO Certification expenses and so on. There is a growing
recognition worldwide that small and medium enterprises (SMEs) have an important role to
play in the present context given their greater resource-use efficiency, capacity for
employment generation, technological innovation, promoting inter-sectoral linkages, raising
exports and developing entrepreneurial skills. All sectors and classes of enterprises, whether
Trading, Service or Manufacturing, Proprietorship, Hindu undivided family, Association of
persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever
name called can apply for the registration and get qualified for the benefits provided under
the Act.
DISCLAIMER
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The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavor to provide
accurate and timely information, there can be no guarantee that such information is accurate
as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice from their own source after a
thorough examination of the particular situation.
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on 15 November 2012
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